10-Q 1 d328034d10q.htm FORM 10Q Form 10Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                         

Commission File No. 0-19424

 

 

EZCORP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   74-2540145

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

1901 Capital Parkway

Austin, Texas

  78746
(Address of principal executive offices)   (Zip Code)

(512) 314-3400

Registrant’s telephone number, including area code:

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

APPLICABLE ONLY TO CORPORATE ISSUERS:

The only class of voting securities of the registrant issued and outstanding is the Class B Voting Common Stock, par value $.01 per share, all of which is owned by an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock.

As of March 31, 2012, 48,002,116 shares of the registrant’s Class A Non-voting Common Stock, par value $.01 per share, and 2,970,171 shares of the registrant’s Class B Voting Common Stock, par value $.01 per share, were outstanding.

 

 

 


Table of Contents

EZCORP, INC.

INDEX TO FORM 10-Q

 

PART I. FINANCIAL INFORMATION

  

Item 1. Financial Statements and Supplementary Data (Unaudited)

  

Condensed Consolidated Balance Sheets as of March 31, 2012, March 31, 2011 and September 30, 2011 (audited)

     1   

Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended March 31, 2012 and 2011

     2   

Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended March 31, 2012 and 2011

     3   

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2012 and 2011

     4   

Consolidated Statements of Stockholders’ Equity for the Six Months Ended March 31, 2012 and 2011

     5   

Notes to Interim Condensed Consolidated Financial Statements

     6   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     37   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     54   

Item 4. Controls and Procedures

     55   

PART II. OTHER INFORMATION

  

Item 1. Legal Proceedings

     56   

Item 1A. Risk Factors

     56   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     56   

Item 6. Exhibits

     57   

SIGNATURES

     58   

EXHIBIT INDEX

     59   


Table of Contents

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Condensed Consolidated Balance Sheets

 

     March 31,
2012
    March 31,
2011
     September 30,
2011
 
     (Unaudited)     (Unaudited)         
     (In thousands)  

Assets:

       

Current assets:

       

Cash and cash equivalents

   $ 47,499      $ 59,785       $ 23,969   

Pawn loans

     122,305        106,525         145,318   

Consumer loans, net

     23,998        11,948         14,611   

Pawn service charges receivable, net

     22,296        19,976         26,455   

Consumer loan fees receivable, net

     24,551        6,026         6,775   

Inventory, net

     87,891        70,275         90,373   

Deferred tax asset

     18,228        23,319         18,125   

Income tax receivable

     2,391        1,427         —     

Prepaid expenses and other assets

     34,443        20,045         30,611   
  

 

 

   

 

 

    

 

 

 

Total current assets

     383,602        319,326         356,237   

Investments in unconsolidated affiliates

     120,056        112,364         120,319   

Property and equipment, net

     95,046        70,105         78,498   

Goodwill

     320,692        143,404         173,206   

Intangible assets, net

     38,904        16,122         19,790   

Non-current consumer loans, net

     52,740        —           —     

Other assets, net

     18,129        7,572         8,400   
  

 

 

   

 

 

    

 

 

 

Total assets

   $ 1,029,169      $ 668,893       $ 756,450   
  

 

 

   

 

 

    

 

 

 

Liabilities and stockholders’ equity:

       

Current liabilities:

       

Current maturities of long-term debt

   $ 23,258      $ 10,000       $ —     

Accounts payable and other accrued expenses

     75,866        44,754         57,400   

Customer layaway deposits

     7,193        6,844         6,176   

Income taxes payable

     —          —           693   
  

 

 

   

 

 

    

 

 

 

Total current liabilities

     106,317        61,598         64,269   

Long-term debt, less current maturities

     109,096        10,000         17,500   

Deferred tax liability

     9,507        1,192         8,331   

Deferred gains and other long-term liabilities

     14,423        2,314         2,102   
  

 

 

   

 

 

    

 

 

 

Total liabilities

     239,343        75,104         92,202   

Commitments and contingencies

       

Temporary equity:

       

Redeemable noncontrolling interest

     34,108        —           —     

Stockholders’ equity:

       

Class A Non-voting Common Stock, par value $.01 per share; authorized 54 million shares; issued and outstanding: 48,002,116 at March 31, 2012; 46,954,535 at March 31, 2011; and 47,228,610 at September 30, 2011

     480        469         471   

Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; issued and outstanding: 2,970,171

     30        30         30   

Additional paid-in capital

     258,343        231,263         242,398   

Retained earnings

     498,708        359,203         422,095   

Accumulated other comprehensive income (loss)

     (1,843     2,824         (746
  

 

 

   

 

 

    

 

 

 

EZCORP, Inc. stockholders’ equity

     755,718        593,789         664,248   
  

 

 

   

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 1,029,169      $ 668,893       $ 756,450   
  

 

 

   

 

 

    

 

 

 

See accompanying notes to interim condensed consolidated financial statements (unaudited).

 

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Condensed Consolidated Statements of Operations (Unaudited)

 

 

     Three Months Ended     Six Months Ended  
     March 31,     March 31,  
     2012     2011     2012     2011  
     (In thousands, except per share amounts)  

Revenues:

        

Sales

   $ 148,172      $ 125,768      $ 291,469      $ 248,313   

Pawn service charges

     56,444        46,769        116,236        96,579   

Consumer loan fees

     50,319        40,472        95,407        86,782   

Other revenues

     1,343        245        2,039        406   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     256,278        213,254        505,151        432,080   

Cost of goods sold

     88,190        76,564        172,010        150,130   

Consumer loan bad debt

     6,466        5,740        17,491        16,768   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     161,622        130,950        315,650        265,182   

Operating expenses:

        

Operations

     77,269        66,045        151,770        130,549   

Administrative

     21,353        15,733        41,064        41,871   

Depreciation and amortization

     7,259        4,466        12,514        8,645   

(Gain) loss on sale or disposal of assets

     27        (178     (174     (171
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     105,908        86,066        205,174        180,894   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     55,714        44,884        110,476        84,288   

Interest income

     (314     (11     (353     (14

Interest expense

     2,560        300        3,150        600   

Equity in net income of unconsolidated affiliates

     (4,577     (4,691     (8,738     (8,058

Other

     802        4        (317     (57
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     57,243        49,282        116,734        91,817   

Income tax expense

     19,870        17,444        40,009        32,550   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     37,373        31,838        76,725        59,267   

Net income attributable to redeemable noncontrolling interest

     112        —          112        —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to EZCORP, Inc.

   $ 37,261      $ 31,838      $ 76,613      $ 59,267   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share:

        

Basic

   $ 0.73      $ 0.64      $ 1.51      $ 1.19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.73      $ 0.63      $ 1.51      $ 1.18   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     50,794        49,924        50,573        49,810   

Diluted

     51,069        50,362        50,887        50,243   

See accompanying notes to interim condensed consolidated financial statements (unaudited).

 

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Condensed Consolidated Statements of Comprehensive Income (Unaudited)

 

     Three Months Ended     Six Months Ended  
     March 31,     March 31,  
     2012     2011     2012     2011  
     (In thousands)     (In thousands)  

Net income

   $ 37,373      $ 31,838      $ 76,725      $ 59,267   

Other comprehensive income (loss):

        

Foreign currency translation adjustments

     6,394        3,111        (2,374     12,888   

Unrealized holding gains (loss) arising during period

     (179     (253     (738     238   

Income tax benefit (provision)

     (75     (687     2,511        (3,927
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

     6,140        2,171        (601     9,199   
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 43,513      $ 34,009      $ 76,124      $ 68,466   
  

 

 

   

 

 

   

 

 

   

 

 

 

Attributable to redeemable noncontrolling interest:

        

Net income

     (112     —          (112     —     

Foreign currency translation adjustments

     (496     —          (496     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     (608     —          (608     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to EZCORP, Inc.

   $ 42,905      $ 34,009      $ 75,516      $ 68,466   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Condensed Consolidated Statements of Cash Flows (Unaudited)

 

     Six Months Ended
March 31,
 
     2012     2011  
     (In thousands)  

Operating Activities:

    

Net income

   $ 76,725      $ 59,267   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     12,514        8,645   

Consumer loan loss provision

     6,761        6,897   

Deferred income taxes

     (72     983   

Gain on sale or disposal of assets

     (174     (171

Stock compensation

     3,238        10,028   

Income from investments in unconsolidated affiliates

     (8,738     (8,058

Changes in operating assets and liabilities, net of business acquisitions:

    

Service charges and fees receivable, net

     6,551        3,642   

Inventory, net

     1,446        860   

Prepaid expenses, other current assets, and other assets, net

     (3,281     (2,648

Accounts payable and accrued expenses

     (821     (5,082

Customer layaway deposits

     206        628   

Deferred gains and other long-term liabilities

     (851     (112

Excess tax benefit from stock compensation

     (1,521     (3,072

Income taxes receivable/payable

     (275     (1,921
  

 

 

   

 

 

 

Net cash provided by operating activities

     91,708        69,886   

Investing Activities:

    

Loans made

     (360,354     (292,525

Loans repaid

     260,289        203,658   

Recovery of pawn loan principal through sale of forfeited collateral

     129,518        104,310   

Additions to property and equipment

     (22,246     (15,129

Acquisitions, net of cash acquired

     (83,160     (31,461

Dividends from unconsolidated affiliates

     4,788        4,218   
  

 

 

   

 

 

 

Net cash used in investing activities

     (71,165     (26,929

Financing Activities:

    

Proceeds from exercise of stock options

     634        205   

Excess tax benefit from stock compensation

     1,521        3,072   

Taxes paid related to net share settlement of equity awards

     (1,071     (7,409

Proceeds from revolving line of credit

     321,617        11,500   

Payments on revolving line of credit

     (318,227     (16,505

Payments on bank borrowings

     (1,056     —     
  

 

 

   

 

 

 

Net cash provided by (used) in financing activities

     3,418        (9,137

Effect of exchange rate changes on cash and cash equivalents

     (431     111   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     23,530        33,931   

Cash and cash equivalents at beginning of period

     23,969        25,854   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 47,499      $ 59,785   
  

 

 

   

 

 

 

Non-cash Investing and Financing Activities:

    

Pawn loans forfeited and transferred to inventory

   $ 123,587      $ 102,145   

Foreign currency translation adjustment

   $ 733      $ (8,708

Issuance of common stock due to acquisitions

   $ 11,615      $ —     

Contingent consideration

   $ 23,000      $ —     

Deferred consideration

   $ 5,785      $ —     

 

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Consolidated Statements of Stockholders’ Equity

 

     Common Stock      Additional
Paid In
Capital
    Retained
Earnings
     Accumulated
Other
Comprehensive
    Total
Shareholders’
Equity
    Redeemable
Noncontrolling
Interest
 
     Shares      Par Value              
     (In thousands)  

Balances at September 30, 2010

     49,226       $ 493       $ 225,374      $ 299,936       $ (6,375   $ 519,428        —     

Stock compensation

     —           —           10,028        —           —          10,028        —     

Stock options exercised

     24         1         203        —           —          204        —     

Release of restricted stock

     675         5         2,761        —           —          2,766        —     

Excess tax benefit from stock compensation

     —           —           306        —           —          306        —     

Taxes paid related to net share settlement of equity awards

     —           —           (7,409     —           —          (7,409     —     

Unrealized gain on available-for-sale securities

     —           —           —          —           155        155        —     

Foreign currency translation adjustment

     —           —           —          —           9,044        9,044        —     

Net income attributable to EZCORP, Inc.

     —           —           —          59,267         —          59,267        —     
               

 

 

   

 

 

 

Total comprehensive income

     —           —           —          —           —          68,466        —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance at March 31, 2011

     49,925       $ 499       $ 231,263      $ 359,203       $ 2,824      $ 593,789      $ —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balances at September 30, 2011

     50,199       $ 501       $ 242,398      $ 422,095       $ (746   $ 664,248        —     

Stock compensation

     —           —           3,238        —           —          3,238        —     

Stock options exercised

     196         2         632        —           —          634        —     

Issuance of common stock due to acquisitions

     427         5         11,625        —           —          11,630        —     

Acquisition of redeemable noncontrolling interest

     —           —           —          —           —          —          33,500   

Release of restricted stock

     150         2         488        —           —          490        —     

Excess tax benefit from stock compensation

     —           —           1,033        —           —          1,033        —     

Taxes paid related to net share settlement of equity awards

     —           —           (1,071     —           —          (1,071     —     

Unrealized (loss) on available-for-sale securities

     —           —           —          —           (480     (480     —     

Foreign currency translation adjustment

     —           —           —          —           (617     (617     496   

Net income attributable to EZCORP, Inc.

     —           —           —          76,613         —          76,613        —     
               

 

 

   

 

 

 

Net income attributable to redeemable noncontrolling interest

     —           —           —          —           —          —          112   

Total comprehensive income

     —           —           —          —           —          75,516        34,108   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance at March 31, 2012

     50,972       $ 510       $ 258,343      $ 498,708       $ (1,843   $ 755,718      $ 34,108   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

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EZCORP, INC. AND SUBSIDIARIES

Notes to Interim Condensed Consolidated Financial Statements (Unaudited)

March 31, 2012

Note A: Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Our management has included all adjustments it considers necessary for a fair presentation. These adjustments are of a normal, recurring nature except for those related to acquired businesses (described in Note B). The accompanying financial statements should be read with the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2011. The balance sheet at September 30, 2011 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Our business is subject to seasonal variations and operating results for the three and six-month periods ended March 31, 2012 (the “current quarter” and “current six-month period”) are not necessarily indicative of the results of operations for the full fiscal year.

The consolidated financial statements include the accounts of EZCORP, Inc. and its consolidated subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. We own 60% of the outstanding equity interests in Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. (“Crediamigo”) and, therefore, include its results in our consolidated financial statements. We account for our investments in Albemarle & Bond Holdings, PLC and Cash Converters International Limited using the equity method.

With the exception of the policies described in the section below, there have been no changes in significant accounting policies as described in our Annual Report on Form 10-K for the year ended September 30, 2011.

Consumer Loans

We provide a variety of short-term consumer loans including payday loans, installment loans and auto title loans, and in Texas only, fee-based credit services to customers seeking loans. In Mexico, Crediamigo enters into agreements with employers that permit it to market long-term consumer loans to employees. Payments are withheld by the employers through payroll deductions and remitted to Crediamigo. With the exception of the incorporation of Crediamigo, there have been no changes to our consumer loans policy.

Revenue Recognition

We recognize consumer loan fees related to loans we directly originate in accordance with state and provincial laws on the percentage of consumer loans made that we believe to be collectible. We earn credit service fees when we assist customers in obtaining consumer loans from unaffiliated lenders, and we recognize the fee revenue ratably over the life of the related loans. We reserve the percentage of interest and credit service fees we expect not to collect. Accrued fees related to defaulted loans reduce fee revenue upon loan default and increase fee revenue upon collection.

Allowance for Losses and Bad Debt Expense

See note K “Allowance for Losses and Credit Quality of Financing Receivables” for a discussion of the Company’s allowance for losses and bad debt expense on consumer loans.

Derivative Instruments and Hedging Activities

We record all derivative instruments according to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-20-25, “Derivatives and Hedging – Recognition.” Accounting for changes in the fair value of derivatives is determined by the intended use of the derivative, whether it is designated as a hedge and whether the hedging relationship is effective in achieving offsetting changes for the risk being hedged. Derivatives designated to hedge the changes in the fair value of an asset, liability or firm commitment due to an identified risk in the hedged item, such as interest rate risk or foreign currency exchange rate risk are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with

 

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the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

We acquire significant amounts of gold either through purchases or from forfeited pawn loan collateral and sell it to refiners. In our first fiscal quarter of 2012, we began using derivate financial instruments in order to manage our commodity price risk associated with the forecasted sales of gold scrap. From time to time, we purchase put options related to the future market price of gold, and simultaneously, we sell a call option for the same future period for a premium to offset the cost of the put. The combined put and call options, or collar, has the effect of providing us protection from the future downward gold price movement but also limits the extent we can participate in future upward price movement. These collars are not designated as hedges as they do not meet the hedge accounting requirements FASB ASC 851-20-25. The fair value of the derivative instruments is recognized in “Prepaid expenses and other assets” in the consolidated balance sheets and changes in fair value are recognized in “Other” in our consolidated statements of operations.

Reclassifications

Previously, we reported segment information based primarily on product offerings. Beginning with the second quarter of fiscal 2012, we redefined our reportable operating segments based on geography as our company is increasingly being organized and managed along geographic lines, with product offerings and channels based on local custom and regulation. For this reason, we concluded that segment reporting based on geography more closely aligns with our management organization and strategic direction. In connection with the new segment structure, we have changed the accountability for, and reporting of, certain items including administrative expenses, depreciation and amortization, interest and our equity in the net income of unconsolidated affiliates. When practical, these items are allocated to segments. Interest is also allocated to operating segments when debt is incurred at the local country level and is non-recourse to EZCORP, Inc. These items are now included in the segment’s measure of profit or loss (“segment contribution”). Expenses that cannot be allocated are included as corporate expenses.

In our second fiscal quarter of 2011, we reclassified fees from our Product Protection Plan and Jewelry VIP Program as well as layaway fees from “Other” revenue to “Sales,” as fees from these products are incidental to sales of merchandise. Prior year figures have been reclassified to conform to this presentation and margins have been recalculated accordingly throughout management’s discussion and analysis.

Recently Issued Accounting Pronouncements

In December 2011, the FASB issued Accounting Standards Update (“ASU”) 2011-11, Disclosures about Offsetting Assets and Liabilities. This update, which amends FASB ASC 210 (Balance Sheet), requires entities to disclose information about offsetting and related arrangements and the effect of those arrangements on its financial position. The amendments in ASU 2011-11 enhance disclosures required by FASB ASC 210 by requiring improved information about financial instruments and derivative instruments that are either offset in accordance with FASB ASC 210-20-45 or 815-10-45 or are subject to an enforceable master netting arrangement or similar agreement. ASU 2011-11 is effective for interim and annual periods beginning on or after January 1, 2013. Disclosures are required retrospectively for all comparative periods presented. Currently, we do not enter into any right of offset arrangements and we do not anticipate that the adoption of ASU 2011-11 will have a material effect on our financial position, results of operations or cash flows.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment. This update amends FASB ASC 350 (Intangibles – Goodwill and Other) by allowing entities to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. The amendments in this update are effective for annual and interim goodwill impairment tests performed for fiscal years beginning on or after December 15, 2011. We do not anticipate the adoption of ASU 2011-08 will have a material effect on our financial position, results of operations or cash flows.

Recently Adopted Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. Generally Accepted Accounting Principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). This update amends FASB ASC 820 (Fair Value Measurement) by providing common principles and requirements for measuring fair value, as well as similar disclosure requirements between U.S. GAAP and IFRS. It changes certain fair value measurement principles, clarifies the application of existing fair value concepts, and expands disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning on or after December 15, 2011. We adopted ASU 2011-04 in our interim period beginning January 1, 2012 with no material effect on our financial position, results of operations or cash flows.

 

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In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05. This update supersedes certain content in ASU 2011-05 Presentation of Comprehensive Income that requires entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. All other requirements in ASU 2011-05, including the requirement to report comprehensive income in either a single continuous financial statement or in two separate but consecutive financial statements, were not affected by ASU 2011-12. This update is effective for fiscal years beginning on or after December 15, 2011. We early adopted this amended standard in our fiscal year beginning October 1, 2011 with no effect on our financial position, results of operations or cash flows.

In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations. The amendments in this update specify that, when presenting comparative financial statements, entities should disclose revenue and earnings of the combined entity as though the business combinations that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. ASU 2010-29 also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments are effective prospectively for material (on an individual or an aggregate basis) business combinations entered into in fiscal years beginning on or after December 15, 2010. We adopted this amended standard on October 1, 2011, resulting in no effect on our financial position, operations or cash flows.

Note B: Acquisitions

On January 30, 2012, we acquired a 60% interest in Crediamigo, a specialty consumer finance company, headquartered in Mexico City, with 45 locations throughout the country for total consideration of $60.1 million, net of cash acquired. This amount includes contingent consideration related to two earn out payments. Annually, over the next two years, if certain financial performance targets are achieved, we will make a payment of $12.0 million dollars, each year, for a total amount of $24.0 million dollars. The purchase price above includes a fair value amount of $23.0 million, attributable to the contingent consideration payments. This amount was calculated using a probability-weighted discounted cash flow approach, in which all outcomes were successful. The significant inputs used for the valuation are not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy.

Pursuant to the Master Transaction Agreement, we agreed to provide to the sellers a put option with respect to their remaining shares of Crediamigo. Each seller has the right to sell their Crediamigo shares to EZCORP, Inc., during the exercise period of two to five years from the acquisition closing date, with no more than 50% of the seller’s shares being sold within a consecutive 12 month period. Under the guidance in ASC 480-10-S99, securities that are redeemable for cash or other assets are to be classified outside of permanent equity; therefore, we have included the redeemable noncontrolling interest related to Crediamigo in temporary equity.

The fair value of the redeemable noncontrolling interest in Crediamigo was estimated by applying an income approach and a market approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Key assumptions include discount rates ranging from 10% to 18%, representing discounts for lack of control and lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest. The fair market value of Crediamigo was determined using a multiple of future earnings that is consistent with other market participants.

The six-month period ended March 31, 2012, includes $7.4 million in revenues and $0.2 million in income related to the Crediamigo acquisition. The purchase price allocation is preliminary as we continue to receive information regarding the acquired assets. We have recorded provisional amounts for certain assets and liabilities for which we have not yet received all information necessary to finalize our assessment.

The six-month period ended March 31, 2012, includes the acquisition of 39 locations in the U.S. and one in Canada for total consideration of $63.4 million, net of cash acquired. As these acquisitions were individually immaterial, we present their related information on a combined basis.

All acquisitions were made as part of our continuing strategy to enhance and diversify our earnings through acquisitions. The factors contributing to the recognition of goodwill were based on several strategic and synergistic benefits we expect to realize from the acquisitions. These benefits include our initial entry into several markets and a greater presence in others, as well as the ability to further leverage our expense structure through increased scale. The purchase price allocation of assets acquired in the most recent twelve months is preliminary as we continue to receive information regarding the acquired assets. Transaction related expenses for the six-month periods ended March 31, 2012 and 2011 of approximately $1.7 million and $0.4 million, respectively, were expensed as incurred and recorded as administrative expenses. These amounts exclude costs related to transactions that did not close and future acquisitions. The results of all acquisitions have been consolidated with our results since their respective closing. Pro forma results of operations have not been presented because it is impracticable to do so, as historical audited financial statements in U.S. GAAP are not readily available.

 

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The following table provides information related to the acquisitions of domestic and foreign retail and financial services locations during the six months ended March 31, 2012 and 2011:

 

 

XXXXXXXXXX XXXXXXXXXX XXXXXXXXXX
     Six Months Ended March 31,  
     2012      2011  
     Crediamigo      Other Acquisitions         

Number of asset purchase acquisitions

     —           6         4   

Number of stock purchase acquisitions

     1         2         2   

U.S. stores acquired

     —           39         9   

Foreign stores acquired

     45         1         —     
  

 

 

    

 

 

    

 

 

 

Total stores acquired

     45         40         9   
  

 

 

    

 

 

    

 

 

 

 

XXXXXXXX XXXXXXXX XXXXXXXX
     Six Months Ended March 31,  
     (In thousands)  
     2012     2011  
     Crediamigo     Other Acquisitions        

Consideration:

      

Cash

   $ 45,001      $ 53,466      $ 31,524   

Equity instruments

     —          11,615        —     

Deferred consideration

     5,785        —          —     

Contingent consideration

     23,000        —          —     
  

 

 

   

 

 

   

 

 

 

Fair value of total consideration transferred

     73,786        65,081        31,524   

Cash acquired

     (13,657     (1,650     (63
  

 

 

   

 

 

   

 

 

 

Total purchase price

   $ 60,129      $ 63,431      $ 31,461   
  

 

 

   

 

 

   

 

 

 

 

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     Six Months Ended March 31,  
     (In thousands)  
     2012      2011  
     Crediamigo      Other Acquisitions         

Current assets:

        

Pawn loans, net

   $ —         $ 5,036       $ 3,066   

Consumer loans, net

     8,658         1,660         —     

Service charges and fees receivable, net

     18,844         1,003         523   

Inventory, net

     —           4,429         1,748   

Deferred tax asset

     —           126         123   

Prepaid expenses and other assets

     3,513         26         10   
  

 

 

    

 

 

    

 

 

 

Total current assets

     31,015         12,280         5,470   

Property and equipment, net

     2,328         1,972         378   

Goodwill

     95,827         50,071         25,708   

Non-current consumer loans, net

     52,228         —           —     

Intangible assets

     16,500         880         145   

Other assets

     16,834         159         7   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 214,732       $ 65,362       $ 31,708   

Current liabilities:

        

Accounts payable and other accrued expenses

   $ 6,830       $ 1,004       $ 49   

Customer layaway deposits

     —           682         96   

Current maturities of long-term debt

     23,219         —           —     

Other current liabilities

     1,010         226         4   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     31,059         1,912         149   

Deferred gains and other long-term liabilities

     936         —           —     

Long-term debt, less current maturities

     87,885         —           —     

Deferred tax liability

     1,223         19         98   
  

 

 

    

 

 

    

 

 

 

Total liabilities

     121,103         1,931         247   

Redeemable noncontrolling interest

     33,500         —           —     
  

 

 

    

 

 

    

 

 

 

Net assets acquired

   $ 60,129       $ 63,431       $ 31,461   
  

 

 

    

 

 

    

 

 

 

Goodwill deductible for tax purposes

   $ —         $ 21,699       $ 16,117   

Goodwill recorded in U.S. & Canada segment

   $ —         $ 50,071       $ 25,708   

Goodwill recorded in Latin America segment

   $ 95,827       $ —         $ —     

Indefinite lived intangible assets acquired:

        

Trade name

   $ 2,200       $ —         $ —     

Definite lived intangible assets acquired:

        

Favorable lease asset

   $ —         $ 230       $ —     

Non-compete agreements

   $ 300       $ 200       $ 145   

Contractual relationship

   $ 14,000       $ 450       $ —     

The amounts above for the six months ended March 31, 2012 include the acquisition of a decision science model for the underwriting of consumer loans, a contractual relationship with an income tax return preparer to facilitate refund anticipation loans, an online lending business in the U.K. and 15 financial services stores in Hawaii and Texas, from FS Management, 1st Money Centers, Inc. and 1429 Funding, Inc., companies owned partially by Brent Turner, the former President of our eCommerce and Card Services division and a former executive officer, for total consideration of $3.0 million in cash and 387,924 shares of our Class A Non-Voting common stock. Mr. Turner received $2.0 million in cash and 167,811 shares of stock in connection with these acquisitions. The basic terms of the acquisitions were agreed prior to the commencement of Mr. Turner’s employment (and, thus, prior to Mr. Turner’s becoming an executive officer), subject to our completion of appropriate due diligence and the execution of appropriate definitive documentation. Even though the terms of the acquisitions were agreed to prior to Mr. Turner’s becoming an executive officer, we treated the transactions as related party transactions. Consequently, pursuant to our Policy for Review and Evaluation of Related Party Transactions, the Audit Committee reviewed and evaluated the terms of the acquisitions and concluded that the transactions were fair to, and in the best interest of, the company and its stockholders.

Note C: Earnings per Share

We compute basic earnings per share on the basis of the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options and restricted stock awards.

 

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Potential common shares are required to be excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vest, as defined by FASB ASC 718-10-25, are greater than the cost to re-acquire the same number of shares at the average market price, and therefore the effect would be anti-dilutive.

Components of basic and diluted earnings per share and excluded anti-dilutive potential common shares are as follows:

 

 

     Three Months Ended      Six Months Ended  
     March 31,      March 31,  
     2012      2011      2012      2011  
     (In thousands, except per share amounts)  

Net income attributable to EZCORP, Inc. (A)

   $ 37,261       $ 31,838       $ 76,613       $ 59,267   

Weighted average outstanding shares of common stock (B)

     50,794         49,924         50,573         49,810   

Dilutive effect of stock options and restricted stock

     275         438         314         433   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average common stock and common stock equivalents (C)

     51,069         50,362         50,887         50,243   
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic earnings per share (A/B)

   $ 0.73       $ 0.64       $ 1.51       $ 1.19   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share (A/C)

   $ 0.73       $ 0.63       $ 1.51       $ 1.18   
  

 

 

    

 

 

    

 

 

    

 

 

 

Potential common shares excluded from the calculation of diluted earnings per share

     —           1         —           2   

Note D: Strategic Investments and Fair Value of Financial Instruments

At March 31, 2012, we owned 16,644,640 ordinary shares of Albemarle & Bond Holdings, PLC, representing almost 30% of its total outstanding shares. Our total cost for those shares was approximately $27.6 million. Albemarle & Bond is primarily engaged in pawnbroking, retail jewelry sales, check cashing and lending in the United Kingdom. We account for the investment using the equity method. Since Albemarle & Bond’s fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. Albemarle & Bond files semi-annual financial reports for its fiscal periods ending December 31 and June 30. The income reported for our year-to-date period ended March 31, 2012 represents our percentage interest in the results of Albemarle & Bond’s operations from July 1, 2011 to December 31, 2011.

Conversion of Albemarle & Bond’s financial statements into U.S. GAAP resulted in no material differences from those reported by Albemarle & Bond following IFRS.

In its functional currency of British pounds, Albemarle & Bond’s total assets increased 12% from December 31, 2010 to December 31, 2011 and its net income for the six months ended December 31, 2011 improved 16%. Below is summarized financial information for Albemarle & Bond’s most recently reported results after translation to U.S. dollars (using the exchange rate as of December 31 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):

 

 

     As of December 31,  
     2011      2010  
     (In thousands)  

Current assets

   $ 134,387       $ 121,519   

Non-current assets

     65,354         56,755   
  

 

 

    

 

 

 

Total assets

   $ 199,741       $ 178,274   
  

 

 

    

 

 

 

Current liabilities

   $ 21,021       $ 25,801   

Non-current liabilities

     62,169         53,497   

Shareholders’ equity

     116,551         98,976   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 199,741       $ 178,274   
  

 

 

    

 

 

 

 

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Table of Contents
     Six Months Ended December 31,  
     2011      2010  
     (In thousands)  

Gross revenues

   $ 99,804       $ 76,424   

Gross profit

     58,165         46,745   

Profit for the year (net income)

     14,208         12,088   

At March 31, 2012, we owned 124,418,000 shares, or approximately 33% of the total ordinary shares of Cash Converters International Limited, which is a publicly traded company headquartered in Perth, Australia. We acquired the shares between November 2009 and May 2010 for approximately $57.8 million. Cash Converters franchises and operates a worldwide network of over 600 specialty financial services and retail stores that provide pawn loans, short-term unsecured loans and other consumer finance products, and buy and sell second-hand goods. Cash Converters has significant store concentrations in Australia and the United Kingdom.

We account for our investment in Cash Converters using the equity method. Since Cash Converters’ fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. Cash Converters files semi-annual financial reports for its fiscal periods ending December 31 and June 30. Due to the three-month lag, income reported for our year-to-date period ended March 31, 2012 represents our percentage interest in the results of Cash Converters’ operations from July 1, 2011 to December 31, 2011.

Conversion of Cash Converters’ financial statements into U.S. GAAP resulted in no material differences from those reported by Cash Converters following IFRS.

In its functional currency of Australian dollars, Cash Converters’ total assets increased 17% from December 31, 2010 to December 31, 2011 and its net income decreased 7% for the six months ended December 31, 2011. Below is summarized financial information for Cash Converters’ most recently reported results after translation to U.S. dollars (using the exchange rate as of December 31 of each year for balance sheet items and average exchange rates for the income statement items for the periods indicated):

 

 

     As of December 31,  
     2011      2010  
     (In thousands)  

Current assets

   $ 128,289       $ 104,408   

Non-current assets

     121,835         109,336   
  

 

 

    

 

 

 

Total assets

   $ 250,124       $ 213,744   
  

 

 

    

 

 

 

Current liabilities

   $ 33,290       $ 30,844   

Non-current liabilities

     37,797         11,970   

Shareholders’ equity

     179,037         170,930   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 250,124       $ 213,744   
  

 

 

    

 

 

 

 

     Six Months Ended December 31,  
     2011      2010  
     (In thousands)  

Gross revenues

   $ 115,256       $ 82,343   

Gross profit

     76,405         57,038   

Profit for the year (net income)

     13,668         13,528   

 

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The table below summarizes the recorded value and fair value of each of these strategic investments at the dates indicated. These fair values are considered Level 1 estimates within the fair value hierarchy of FASB ASC 820-10-50, and were calculated as (a) the quoted stock price on each company’s principal market multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate at the dates indicated. We included no control premium for owning a large percentage of outstanding shares.

 

 

     March 31,      September 30,  
     2012      2011      2011  
     (In thousands of U.S. dollars)  

Albemarle & Bond:

        

Recorded value

   $ 49,175       $ 44,784       $ 48,361   

Fair value

     92,868         81,655         91,741   

Cash Converters:

        

Recorded value

   $ 70,881       $ 67,580       $ 71,958   

Fair value

     85,277         102,610         53,600   

In August 2011, legislation was proposed in Australia that would, among other things, limit the interest charged on certain consumer loans and prohibit loan extensions and refinancing. If this legislation is enacted in its currently proposed form, Cash Converters’ consumer loan business in Australia may be adversely affected, which could have the effect of decreasing Cash Converters’ revenues and earnings. As of September 30, 2011, the fair value of our investment in Cash Converters (based on the market price of Cash Converters’ stock as of that date) was below our recorded value. In light of Cash Converters’ statements at that time regarding its ability to mitigate the potential impact of the proposed legislation, we considered this loss in value to be temporary. Following a series of representations from Cash Converters, its customers and other industry executives, the Australian Parliament, referred the bill to the Senate Economics committee and to the Joint Committee on Corporations and Financial Services for review. The committees concluded that the proposed legislation did not achieve an appropriate balance between consumer protection and industry viability and recommended that the Australian government revisit key aspects of its reform package with further industry consultation. As of March 31, 2012, the fair value of our investment in Cash Converters was above our recorded value, further supporting our assessment of the loss in value of its stock to be temporary.

Note E: Goodwill and Other Intangible Assets

The following table presents the balance of each major class of indefinite-lived intangible asset at the specified dates:

 

 

     March 31,      September 30,  
     2012      2011      2011  
     (In thousands)  

Pawn licenses

   $ 8,836       $ 8,836       $ 8,836   

Trade name

     7,097         4,870         4,870   

Goodwill

     320,692         143,404         173,206   
  

 

 

    

 

 

    

 

 

 

Total

   $ 336,625       $ 157,110       $ 186,912   
  

 

 

    

 

 

    

 

 

 

The following tables present the changes in the carrying value of goodwill, by segment, over the periods presented:

 

 

     U.S. &
Canada
    Latin
America
     Other
International
     Consolidated  
     (In thousands)  

Balance at September 30, 2011

   $ 163,897      $ 9,309       $ —         $ 173,206   

Acquisitions

     50,071        95,827         —           145,898   

Effect of foreign currency translation changes

     (1     1,589         —           1,588   
  

 

 

   

 

 

    

 

 

    

 

 

 

Balance at March 31, 2012

   $ 213,967      $ 106,725       $ —         $ 320,692   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

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     U.S. &
Canada
     Latin
America
     Other
International
     Consolidated  
     (In thousands)  

Balance at September 30, 2010

   $ 110,255       $ 7,050       $ —         $ 117,305   

Acquisitions

     25,784         —           —           25,784   

Effect of foreign currency translation changes

     —           315         —           315   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2011

   $ 136,039       $ 7,365       $ —         $ 143,404   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at the specified dates:

 

 

     March 31,      September 30,  
     2012      2011      2011  
     Carrying
Amount
     Accumulated
Amortization
    Net Book
Value
     Carrying
Amount
     Accumulated
Amortization
    Net
Book
Value
     Carrying
Amount
     Accumulated
Amortization
    Net
Book
Value
 
     (In thousands)  

Real estate finders’ fees

   $ 1,327       $ (533   $ 794       $ 1,098       $ (442   $ 656       $ 1,157       $ (479   $ 678   

Non-compete agreements

     4,301         (2,877     1,424         3,313         (2,277     1,036         3,722         (2,459     1,263   

Favorable lease

     985         (381     604         644         (264     380         755         (322     433   

Franchise rights

     1,602         (67     1,535         —           —          —           1,547         (32     1,515   

Deferred financing costs

     7,607         (2,493     5,114         1,470         (1,180     290         2,411         (262     2,149   

Contractual relationship

     14,604         (1,407     13,197         —           —          —           —           —          —     

Other

     323         (20     303         63         (9     54         58         (12     46   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 30,749       $ (7,778   $ 22,971       $ 6,588       $ (4,172   $ 2,416       $ 9,650       $ (3,566   $ 6,084   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The amortization of most definite-lived intangible assets is recorded as amortization expense. The favorable lease asset and other intangibles are amortized to operations expense (rent expense) over the related lease terms. The deferred financing costs are amortized to interest expense over the life of our credit agreement. The following table presents the amount and classification of amortization recognized as expense in each of the periods presented:

 

 

     Three Months Ended      Six Months Ended  
     March 31,      March 31,  
     2012      2011      2012      2011  
     (In thousands)  

Amortization expense

   $ 1,697       $ 221       $ 1,924       $ 433   

Operations expense

     23         25         49         48   

Interest expense

     444         112         595         226   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expense from the amortization of definite-lived intangible assets

   $ 2,164       $ 358       $ 2,568       $ 707   

The following table presents our estimate of amortization expense for definite-lived intangible assets:

 

 

Fiscal Years Ended September 30,

   Amortization expense      Operations expense      Interest expense  
     (In thousands)  

2012

   $ 6,356       $ 129       $ 2,341   

2013

     8,665         119         2,031   

2014

     1,399         108         670   

2015

     277         96         370   

2016

     218         94         —     

As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.

 

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Note F: Long-term Debt

The table presents our long-term debt instruments and balances outstanding at March 31, 2012 and 2011 and September 30, 2011 (in thousands):

 

 

     March 31, 2012      March 31,      September 30,  
     Carrying
Amount
     Contractual
Amount
     2011      2011  

Recourse to EZCORP:

           

Domestic line of credit up to $175,000 due 2015

   $ 30,000       $ 30,000       $ —         $ 17,500   

Term debt due 2012

     —           —           20,000         —     

Non-recourse to EZCORP:

           

10% unsecured notes due 2013

   $ 1,820       $ 1,820       $ —         $ —     

16% unsecured notes due 2013

     5,404         5,141         —           —     

20% unsecured notes due 2013

     12,730         10,854         —           —     

14% secured notes due 2013

     3,327         3,079         —           —     

17% secured notes due 2014

     33,710         28,821         —           —     

25% secured notes due 2015

     6,675         5,125         —           —     

18% secured notes due 2015

     26,391         20,683         —           —     

20% secured notes due 2015

     10,783         7,335         —           —     

10% unsecured notes due 2016

     1,514         1,514         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt

   $ 132,354       $ 114,372       $ 20,000       $ 17,500   
  

 

 

    

 

 

    

 

 

    

 

 

 

On May 10, 2011, we entered into a new senior secured credit agreement with a syndicate of five banks, replacing our previous credit agreement. Among other things, the new credit agreement provides for a four year $175 million revolving credit facility that we may, under the terms of the agreement, request to be increased to a total of $225 million. Upon entering the new credit agreement, we repaid and retired our $17.5 million outstanding debt. The new credit facility increases our available credit and provides greater flexibility to make investments and acquisitions both domestically and internationally.

Pursuant to the credit agreement, we may choose to pay interest to the lenders for outstanding borrowings at LIBOR plus 200 to 275 basis points or the bank’s base rate plus 100 to 175 basis points, depending on our leverage ratio computed at the end of each calendar quarter. On the unused amount of the credit facility, we pay a commitment fee of 37.5 to 50 basis points depending on our leverage ratio calculated at the end of each quarter. From the closing date to approximately October 31, 2011, we paid a minimum interest rate of LIBOR plus 250 basis points or the bank’s base rate plus 150 basis points, at our option, and a commitment fee of 50 basis points on the unused portion of the credit line. Terms of the credit agreement require, among other things, that we meet certain financial covenants. At March 31, 2012, we were in compliance with all covenants. We expect the recorded value of our debt to approximate its fair value as it is all variable rate debt and carries no pre-payment penalty.

Deferred financing costs related to our credit agreement are included in intangible assets, net on the balance sheet and are being amortized to interest expense over the term of the agreement.

On January 30, 2012, we acquired a 60% ownership interest in Crediamigo, a specialty consumer finance company headquartered in Mexico City. Non-recourse debt amounts in the table above represent Crediamigo’s third party debt. All secured notes are guaranteed by the Crediamigo loan portfolio. The 14% secured notes require monthly payments of $0.1 million with remaining principal due at maturity. Beginning September 30, 2012, the 18% secured notes require monthly payments of $0.1 million increasing to $0.7 million on November 30, 2012, with the remaining principal due at maturity. On November 30, 2012, the 17% secured notes require monthly payments of $1.0 million, with remaining principal due at maturity. The difference between the carrying amount and contractual amount relates to premium on Crediamigo’s debt recorded as part of the purchase accounting, which is being amortized as a reduction of interest expense over the life of the debt.

Included in the amounts above are notes due to Crediamigo’s shareholders, which are presented in the table below (in thousands):

 

 

     March 31, 2012  

16% unsecured notes due 2013

   $ 5,141   

17% secured notes due 2014

     9,676   

10% unsecured notes due 2016

     963   
  

 

 

 

Total debt to stockholders

   $ 15,780   
  

 

 

 

 

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Note G: Stock Compensation

Our net income includes the following compensation costs related to our stock compensation arrangements:

 

 

     Three Months Ended     Six Months Ended  
     March 31,     March 31,  
     2012     2011     2012     2011  
     (In thousands)  

Gross compensation costs

   $ 1,725      $ 1,480      $ 3,238      $ 10,028   

Income tax benefits

     (570     (479     (1,016     (3,453
  

 

 

   

 

 

   

 

 

   

 

 

 

Net compensation expense

   $ 1,155      $ 1,001      $ 2,222      $ 6,575   
  

 

 

   

 

 

   

 

 

   

 

 

 

Included in the compensation cost for the six months ended March 31, 2011 is $7.3 million for the accelerated vesting of restricted stock upon the retirement of our former Chief Executive Officer on October 31, 2010, and a related $2.5 million income tax benefit. Stock option exercises resulted in the issuance of 195,898 shares in the current quarter for total proceeds of $0.6 million. All options and restricted stock relate to our Class A Non-voting Common Stock.

Note H: Income Taxes

The current quarter’s effective tax rate is 34.7% of pretax income compared to 35.4% for the prior year quarter. For the current six-month period, the effective tax rate is 34.3% compared to 35.5% in the prior six-month period. The decrease in effective tax rates is primarily due to the recognition of state net operating losses, as well as an increase in foreign tax credits on overseas earnings.

Note I: Contingencies

Currently and from time to time, we are defendants in various legal and regulatory actions. While we cannot determine the ultimate outcome of these actions, we believe their resolution will not have a material adverse effect on our financial condition, results of operations or liquidity. However, we cannot give any assurance as to their ultimate outcome.

Note J: Operating Segment Information

Segment information is prepared on the same basis that our management reviews financial information for operational decision-making purposes. Previously, we reported segment information based primarily on product offerings. Beginning with the second quarter of fiscal 2012, we redefined our reportable operating segments based on geography as our company is increasingly being organized and managed along geographic lines, with product offerings and channels based on local custom and regulation. As a result, we concluded that segment reporting based on geography more closely aligns with our management organization and strategic direction.

For periods ending after January 1, 2012, we will report segments as follows:

 

   

U.S. & Canada – All business activities in the United States and Canada

 

   

Latin America – All business activities in Mexico and other parts of Latin America

 

   

Other International – All business activities in the rest of the world (currently consisting of consumer loans online in the U.K. and our equity interests in the net income of Albemarle & Bond and Cash Converters International)

Concurrent with the change in reportable operating segments, we revised our prior period financial information to reflect comparable financial information for the new segment structure.

There are no inter-segment revenues, and the amounts below were determined in accordance with the same accounting principles used in our consolidated financial statements. The following tables present operating segment information for the three and six-month periods ending March 31, 2012 and 2011, including the reclassifications discussed in Note A “Significant Accounting Policies.”

 

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Table of Contents

 

     Three Months Ended March 31, 2012  
      U.S. &
Canada
     Latin
America
     Other
International
    Consolidated  
     (In thousands)  

Revenues:

          

Merchandise sales

   $ 85,498       $ 9,499       $ —        $ 94,997   

Jewelry scrapping sales

     49,414         3,761         —          53,175   

Pawn service charges

     50,505         5,939         —          56,444   

Consumer loan fees

     42,806         7,383         130        50,319   

Other revenues

     1,219         124         —          1,343   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     229,442         26,706         130        256,278   

Merchandise cost of goods sold

     50,499         5,381         —          55,880   

Jewelry scrapping cost of goods sold

     29,537         2,773         —          32,310   

Consumer loan bad debt

     5,878         508         80        6,466   
  

 

 

    

 

 

    

 

 

   

 

 

 

Net revenues

     143,528         18,044         50        161,622   

Operating expenses:

          

Store operations

     68,890         8,211         168        77,269   

Administrative

     5,424         4,334         2        9,760   

Depreciation and amortization

     3,524         2,397         14        5,935   

Loss on sale or disposal of assets

     25         2         —          27   

Interest, net

     —           1,769         —          1,769   

Equity in net income of unconsolidated affiliates

     —           —           (4,577     (4,577

Other

     791         11         —          802   
  

 

 

    

 

 

    

 

 

   

 

 

 

Segment contribution

   $ 64,874       $ 1,320       $ 4,443      $ 70,637   

Corporate expenses

             13,394   
          

 

 

 

Income before taxes

             57,243   

Income tax expense

       19,870   
          

 

 

 

Net income

             37,373   

Net income attributable to redeemable noncontrolling interest

             112   
          

 

 

 

Net income attributable to EZCORP, Inc.

           $ 37,261   
          

 

 

 

 

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Table of Contents
     Three Months Ended March 31, 2011  
      U.S. &
Canada
    Latin
America
    Other
International
    Consolidated  
     (In thousands)  

Revenues:

        

Merchandise sales

   $ 72,420      $ 5,353      $ —        $ 77,773   

Jewelry scrapping sales

     44,351        3,644        —          47,995   

Pawn service charges

     43,073        3,696        —          46,769   

Consumer loan fees

     40,472        —          —          40,472   

Other revenues

     220        25        —          245   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     200,536        12,718        —          213,254   

Merchandise cost of goods sold

     41,484        3,155        —          44,639   

Jewelry scrapping cost of goods sold

     28,848        3,077        —          31,925   

Consumer loan bad debt

     5,740        —          —          5,740   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     124,464        6,486        —          130,950   

Operating expenses:

        

Store operations

     61,196        4,849        —          66,045   

Administrative

     4,407        1,079        27        5,513   

Depreciation and amortization

     2,885        678        —          3,563   

Gain on sale or disposal of assets

     (178     —          —          (178

Interest, net

     —          1        —          1   

Equity in net income of unconsolidated affiliates

     —          —          (4,691     (4,691

Other

     3        1        —          4   
  

 

 

   

 

 

   

 

 

   

 

 

 

Segment contribution

   $ 56,151      $ (122   $ 4,664      $ 60,693   

Corporate expenses

           11,411   
        

 

 

 

Income before taxes

           49,282   

Income tax expense

       17,444   
        

 

 

 

Net income

           31,838   

Net income attributable to redeemable noncontrolling interest

           —     
        

 

 

 

Net income attributable to EZCORP, Inc.

         $ 31,838   
        

 

 

 

 

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Table of Contents
     Six Months Ended March 31, 2012  
      U.S. &
Canada
    Latin
America
     Other
International
    Consolidated  
     (In thousands)  

Revenues:

         

Merchandise sales

   $ 162,050      $ 19,841       $ —        $ 181,891   

Jewelry scrapping sales

     102,280        7,298         —          109,578   

Pawn service charges

     104,875        11,361         —          116,236   

Consumer loan fees

     87,818        7,383         206        95,407   

Other revenues

     1,795        244         —          2,039   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     458,818        46,127         206        505,151   

Merchandise cost of goods sold

     93,950        10,326         —          104,276   

Jewelry scrapping cost of goods sold

     62,687        5,047         —          67,734   

Consumer loan bad debt

     16,768        508         215        17,491   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net revenues

     285,413        30,246         (9     315,650   

Operating expenses:

         

Store operations

     137,215        14,209         346        151,770   

Administrative

     11,871        5,629         422        17,922   

Depreciation and amortization

     6,771        3,174         36        9,981   

(Gain) loss on sale or disposal of assets

     (175     1         —          (174

Interest, net

     4        1,733         —          1,737   

Equity in net income of unconsolidated affiliates

     —          —           (8,738     (8,738

Other

     (269     16         (64     (317
  

 

 

   

 

 

    

 

 

   

 

 

 

Segment contribution

   $ 129,996      $ 5,484       $ 7,989      $ 143,469   

Corporate expenses

            26,735   
         

 

 

 

Income before taxes

            116,734   

Income tax expense

       40,009   
         

 

 

 

Net income

            76,725   

Net income attributable to redeemable noncontrolling interest

            112   
         

 

 

 

Net income attributable to EZCORP, Inc.

          $ 76,613   
         

 

 

 

 

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Table of Contents
      Six Months Ended March 31, 2011  
      U.S. &
Canada
    Latin
America
     Other
International
    Consolidated  
     (In thousands)  

Revenues:

         

Merchandise sales

   $ 138,725      $ 10,928       $ —        $ 149,653   

Jewelry scrapping sales

     91,554        7,106         —          98,660   

Pawn service charges

     89,509        7,070         —          96,579   

Consumer loan fees

     86,782        —           —          86,782   

Other revenues

     378        28         —          406   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total revenues

     406,948        25,132         —          432,080   

Merchandise cost of goods sold

     79,681        6,269         —          85,950   

Jewelry scrapping cost of goods sold

     58,465        5,715         —          64,180   

Consumer loan bad debt

     16,768        —           —          16,768   
  

 

 

   

 

 

    

 

 

   

 

 

 

Net revenues

     252,034        13,148         —          265,182   

Operating expenses:

         

Store operations

     121,422        9,127         —          130,549   

Administrative

     9,810        2,016         52        11,878   

Depreciation and amoritzation

     5,602        1,281         —          6,883   

(Gain) loss on sale or disposal of assets

     (172     1         —          (171

Interest, net

     —          2         —          2   

Equity in net income of unconsolidated affiliates

     —          —           (8,058     (8,058

Other

     3        1         (61     (57
  

 

 

   

 

 

    

 

 

   

 

 

 

Segment contribution

   $ 115,369      $ 720       $ 8,067      $ 124,156   

Corporate expenses

            32,339   
         

 

 

 

Income before taxes

            91,817   

Income tax expense

       32,550   
         

 

 

 

Net income

            59,267   

Net income attributable to redeemable noncontrolling interest

            —     
         

 

 

 

Net income attributable to EZCORP, Inc.

          $ 59,267   
         

 

 

 

 

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Table of Contents

The following table presents separately identified segment assets:

 

 

      U.S. &
Canada
     Latin
America
     Other
International
     Consolidated  
     (In thousands)  

Assets at March 31, 2012:

           

Pawn loans, net

   $ 108,804       $ 13,501       $ —         $ 122,305   

Consumer loans, net

     14,072         62,579         87         76,738   

Service charges and fees receivable, net

     25,886         20,933         28         46,847   

Inventory, net

     77,190         10,701         —           87,891   

Property and equipment, net

     57,241         19,180         —           76,421   

Goodwill

     213,967         106,725         —           320,692   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total separately identified recorded segment assets

   $ 497,160       $ 233,619       $ 115       $ 730,894   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans outstanding from unaffiliated lenders

   $ 20,056       $ —         $ —         $ 20,056   

Assets at March 31, 2011:

           

Pawn loans, net

   $ 97,375       $ 9,150       $ —         $ 106,525   

Consumer loans, net

     11,948         —           —           11,948   

Service charges and fees receivable, net

     24,647         1,355         —           26,002   

Inventory, net

     63,242         7,033         —           70,275   

Property and equipment, net

     46,155         11,925         —           58,080   

Goodwill

     136,039         7,365         —           143,404   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total separately identified recorded segment assets

   $ 379,406       $ 36,828       $ —         $ 416,234   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans outstanding from unaffiliated lenders

   $ 21,504       $ —         $ —         $ 21,504   

Assets at September 30, 2011:

           

Pawn loans, net

   $ 134,457       $ 10,861       $ —         $ 145,318   

Consumer loans, net

     14,611         —           —           14,611   

Service charges and fees receivable, net

     31,567         1,663         —           33,230   

Inventory, net

     81,859         8,514         —           90,373   

Property and equipment, net

     51,469         12,769         —           64,238   

Goodwill

     163,897         9,309         —           173,206   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total separately identified recorded segment assets

   $ 477,860       $ 43,116       $ —         $ 520,976   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans outstanding from unaffiliated lenders

   $ 27,040       $ —         $ —         $ 27,040   

Note: Property and equipment, net on the Condensed Consolidating Balance Sheet includes corporate amounts that are not shown in the tables above.

Note K: Allowance for Losses and Credit Quality of Financing Receivables

We offer a variety of loan products and credit services to customers who do not have cash resources or access to credit to meet their cash needs. Our customers are considered to be in a higher risk pool with regard to creditworthiness when compared to those of typical financial institutions. As a result, our receivables do not have a credit risk profile that can easily be measured by the normal credit quality indicators used by the financial markets. We manage the risk through closely monitoring the performance of the portfolio and through our underwriting process. This process includes review of customer information, such as making a credit reporting agency inquiry, evaluating and verifying income sources and levels, verifying employment and verifying a telephone number where customers may be contacted. For auto title loans, we additionally inspect the automobile, title and reference to market values of used automobiles.

We consider consumer loans made by our wholly owned subsidiaries defaulted if they have not been repaid or renewed by the maturity date. If one payment of an installment loan is delinquent, that one payment is considered defaulted. If more than one installment payment is delinquent at any time, the entire installment loan is considered defaulted. Although defaulted loans may be collected later, we charge the loan principal to consumer loan bad debt upon default, leaving only active loans in the reported balance. Accrued fees related to defaulted loans reduce fee revenue upon loan default, and increase fee revenue upon collection.

 

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Table of Contents

Based on historical collection experience, the age of past-due loans and amounts we expect to receive through the sale of repossessed vehicles, we provide an allowance for losses on auto title loans.

The Crediamigo acquisition marked our initial entry into unsecured consumer lending in Mexico. Crediamigo considers consumer loans defaulted if the customer is no longer employed, and therefore Crediamigo is no longer entitled to payments via payroll withholdings. Once Crediamigo receives notice that the customer’s employment has been terminated, we charge the loan principal to consumer loan bad debt, leaving only active loans in the reported balance. Accrued fees related to defaulted loans reduce fee revenue upon default, and increase fee revenue upon collection.

The accuracy of our allowance estimates is dependent upon several factors, including our ability to predict future default rates based on historical trends and expected future events. We base our estimates on observable trends and various other assumptions that we believe to be reasonable under the circumstances.

The following table presents changes in the allowance for credit losses as well as the recorded investment in our financing receivables by portfolio segment for the periods presented:

 

 

Description

   Allowance
Balance at
Beginning
of Period
    Charge-offs     Recoveries      Provision      Allowance
Balance at
End of
Period
     Financing
Receivable
at End of
Period
 
     (In thousands)  

Allowance for lossed on unsecured short-term consumer loans:

               

Three Months Ended March 31, 2012

   $ 1,730      $ (4,275   $ 2,245       $ 1,741       $ 1,441       $ 12,892   

Three Months Ended March 31, 2011

   $ 1,210      $ (3,985   $ 1,574       $ 2,311       $ 1,110       $ 11,036   

Six Months Ended March 31, 2012

   $ 1,727      $ (8,954   $ 3,703       $ 4,965       $ 1,441       $ 12,892   

Six Months Ended March 31, 2011

   $ 750      $ (8,245   $ 3,070       $ 5,535       $ 1,110       $ 11,036   

Allowance for losses on secured short-term consumer loans:

               

Three Months Ended March 31, 2012

   $ 982      $ (4,427   $ 3,823       $ 330       $ 708       $ 3,418   

Three Months Ended March 31, 2011

   $ 1,316      $ (3,437   $ 2,857       $ 74       $ 810       $ 2,832   

Six Months Ended March 31, 2012

   $ 538      $ (7,767   $ 6,642       $ 1,295       $ 708       $ 3,418   

Six Months Ended March 31, 2011

   $ 1,137      $ (6,882   $ 5,572       $ 983       $ 810       $ 2,832   

Allowance for losses on unsecured long-term consumer loans:

               

Three Months Ended March 31, 2012

   $ 2,752   $ (661   $ 230       $ 508       $ 2,829       $ 65,405   

 

* For presentation purposes, the beginning balance includes the Crediamigo allowance amount as of the acquisition date.

The provisions presented in the table above include only principal and excludes items such as non-sufficient funds fees, repossession fees, auction fees and interest. In addition, all credit service expenses and fees related to loans made by our unaffiliated lenders are excluded, as we do not own the loans made in connection with our credit services and they are not recorded as assets on our balance sheets. Expected losses on credit services are accrued and reported in “Accounts payable and other accrued expenses” on our balance sheets.

Auto title loans are our only consumer loans made by our wholly owned subsidiaries that remain as recorded investments when in delinquent or nonaccrual status. We consider an auto title loan past due if it has not been repaid or renewed by the maturity date. Based on experience, we establish a reserve on all auto title loans. On auto title loans more than 90 days past due, we reserve the percentage we estimate will not be recoverable through auction and reserve 100% of loans for which we have not yet repossessed the underlying collateral. No fees are accrued on any auto title loans more than 90 days past due.

Consumer loans made by Crediamigo remain on the balance sheet as recorded investments when in delinquent status. We consider a consumer loan past due if it has not been repaid or renewed by the maturity date; however, it is not unusual to have a lag in payments due to the time it takes the government agencies to setup the initial payroll withholding. Only those consumer loans made to customers that are no longer employed are considered in nonaccrual status. Crediamigo establishes a reserve on all consumer loans, based on historical experience. No fees are accrued on any consumer loans made to customers that are no longer employed.

 

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The following table presents an aging analysis of past due financing receivables by portfolio segment:

 

 

     Days Past Due     Total     Current     Total
Financing
    Recorded
Investment
> 90 Days
&
 
     1-30     31-60     61-90     >90     Past Due     Receivable     Receivable     Accruing  
     (In thousands)  

Secured short-term consumer loans

                

March 31, 2012

                

Consumer loans

   $ 530      $ 285      $ 252      $ 433      $ 1,500      $ 1,918      $ 3,418      $ —     

Reserve

   $ 73      $ 109      $ 87      $ 381      $ 650      $ 58      $ 708      $ —     

Reserve %

     14     38     35     88     43     3     21     —     

March 31, 2011

                

Consumer loans

   $ 324      $ 272      $ 368      $ 493      $ 1,457      $ 1,375      $ 2,832      $ —     

Reserve

   $ 82      $ 76      $ 151      $ 427      $ 736      $ 74      $ 810      $ —     

Reserve %

     25     28     41     87     51     5     29     —     

September 30, 2011

                

Consumer loans

   $ 840      $ 479      $ 283      $ 219      $ 1,821      $ 1,939      $ 3,760      $ —     

Reserve

   $ 117      $ 114      $ 67      $ 172      $ 470      $ 68      $ 538      $ —     

Reserve %

     14     24     24     79     26     4     14     —     

Unsecured long-term consumer loans: *

                

March 31, 2012

                

Consumer loans

   $ 8,122      $ 14,354      $ 527      $ 5,516      $ 28,519      $ 36,886      $ 65,405      $ 5,516   

Reserve

   $ 351      $ 620      $ 23      $ 238      $ 1,232      $ 1,594      $ 2,826      $ 238   

Reserve %

     4     4     4     4     4     4     4     4

 

* Unsecured long-term consumer loans amounts are included for periods after the acquisition of Crediamigo.

Note L: Fair Value Measurements

In accordance with FASB ASC 820-10, Fair Value Measurements and Disclosures, our assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Other observable inputs other than quoted market prices.

Level 3: Unobservable inputs that are not corroborated by market data.

The tables below present our financial assets that are measured at fair value on a recurring basis as of March 31, 2012 and 2011 and September 30, 2011:

 

 

     March 31, 2012      Fair Value Measurements Using  

Financial assets:

      Level 1      Level 2      Level 3  
     (In thousands)  

Marketable equity securities

   $ 4,628       $ 4,628       $ —         $ —     
     March 31, 2011      Fair Value Measurements Using  

Financial assets:

      Level 1      Level 2      Level 3  
     (In thousands)  

Marketable equity securities

   $ 4,674       $ 4,674       $ —         $ —     
     September 30, 2011      Fair Value Measurements Using  

Financial assets:

      Level 1      Level 2      Level 3  
     (In thousands)  

Marketable equity securities

   $ 5,366       $ 5,366       $ —         $ —     

 

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We measure the value of our marketable equity securities under a Level 1 input. These assets are publicly traded equity securities for which market prices are readily available. There were no transfers of assets in or out of Level 1 fair value measurements in the periods presented.

Note M: Derivative Instruments and Hedging Activities

Our earnings and financial position are affected by changes in gold values. In fiscal year 2012, we began using derivative financial instruments in order to manage our commodity price risk associated with the forecasted sales of gold scrap. These derivatives are not designated as hedges, and according to FASB ASC 815-20-25, “Derivatives and Hedging – Recognition,” changes in their fair value are recorded directly in earnings. As of March 31, 2012, we had no balance outstanding recorded on our balance sheet.

The table below presents the effect of our derivative financial instruments on the Condensed Consolidated Statements of Operations for three months and six months ended March 31, 2012 and 2011:

 

 

          (Gains) Losses Recognized in Income  
           Three Months Ended March 31,      Six Months Ended March 31,  

Derivative Instrument

  

Location of (Gain) or Loss

   2012      2011      2012     2011  
          (In thousands)  

Non-designated derivatives:

             

Gold Collar

   Other (income) expense    $ 922       $ —         $ (151   $ —     

Note N: Condensed Consolidating Financial Information

On February 3, 2012, we filed with the United States Securities and Exchange Commission a “shelf” registration statement on Form S-3 registering the offer and sale of an indeterminate amount of a variety of securities, including debt securities. Unless otherwise indicated in connection with a particular offering of debt securities, each of our domestic subsidiaries will fully and unconditionally guarantee on a joint and several basis our payment obligations under such debt securities.

In accordance with Rule 3-10(d) of Regulation S-X, the following presents condensed consolidating financial information as of March 31, 2012 and 2011 and for the current and prior three and six-month periods then ended and as of September 30, 2011 for EZCORP, Inc. (the “Parent”), each of the Parent’s domestic subsidiaries (the “Subsidiary Guarantors”) on a combined basis and each of the Parent’s other subsidiaries (the “Other Subsidiaries”) on a combined basis. Eliminating entries presented are necessary to combine the groups of entities.

 

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Condensed Consolidating Balance Sheets

 

 

     March 31, 2012  
      (Unaudited)  
      (In thousands)  
     Parent      Subsidiary
Guarantors
    Other
Subsidiaries
    Eliminations     Consolidated  

Assets:

           

Current assets:

           

Cash and cash equivalents

   $ 703       $ 28,899      $ 17,897      $ —        $ 47,499   

Pawn loans, net

     —           108,804        13,501        —          122,305   

Consumer loans, net

     —           11,910        12,088        —          23,998   

Pawn service charges receivable, net

     —           20,210        2,086        —          22,296   

Consumer loan fees receivable, net

     —           5,523        19,028        —          24,551   

Inventory, net

     —           75,872        12,019        —          87,891   

Deferred tax asset

     12,298         5,478        452        —          18,228   

Receivable from affiliates

     286,603         83,648        —          (370,251     —     

Federal income tax receivable

     1,172         415        804          2,391   

Prepaid expenses and other assets

     4         29,440        4,999        —          34,443   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     300,780         370,199        82,874        (370,251     383,602   

Investments in unconsolidated affiliates

     70,882         49,174        —          —          120,056   

Investments in subsidiaries

     94,795         89,576        —          (184,371     —     

Property and equipment, net

     —           66,331        28,715        —          95,046   

Goodwill

     42         213,894        106,756        —          320,692   

Intangible assets, net

     1,848         16,028        21,028          38,904   

Non-current consumer loans, net

     —           —          52,740        —          52,740   

Other assets, net

     —           6,822        11,307        —          18,129   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 468,347       $ 812,024      $ 303,420      $ (554,622   $ 1,029,169   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and stockholders’ equity:

           

Current liabilities:

           

Current maturitites of long-term debt

   $ —         $ —        $ 23,258      $ —        $ 23,258   

Accounts payable and other accrued expenses

     46         50,570        25,250        —          75,866   

Customer layaway deposits

     —           6,551        642        —          7,193   

Intercompany payables

     19,791         305,685        44,775        (370,251     —     

Federal income taxes payable

     9,745         (5,156     (4,589     —          —     
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     29,582         357,650        89,336        (370,251     106,317   

Long-term debt, less current maturities

     30,000         —          79,096        —          109,096   

Deferred tax liability

     6,422         1,304        1,781        —          9,507   

Deferred gains and other long-term liabilities

     —           1,989        12,434        —          14,423   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     66,004         360,943        182,647        (370,251     239,343   

Commitments and contingencies

           

Temporary equity:

           

Redeemable noncontrolling interest

     —           —          34,108        —          34,108   

Stockholders’ equity:

           

Class A Non-voting Common Stock, par value $.01 per share;

     468         12        —          —          480   

Class B Voting Common Stock, convertible, par value $.01 per share;

     30         —          —          —          30   

Additional paid-in capital

     234,233         112,661        95,820        (184,371     258,343   

Retained earnings

     164,022         339,936        (5,250     —          498,708   

Accumulated other comprehensive income (loss)

     3,590         (1,528     (3,905     —          (1,843
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

EZCORP, Inc. stockholders’ equity

     402,343         451,081        86,665        (184,371     755,718   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 468,347       $ 812,024      $ 303,420      $ (554,622   $ 1,029,169   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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Table of Contents
     March 31, 2011  
      (Unaudited)  
      (In thousands)  
      Parent     Subsidiary
Guarantors
    Other
Subsidiaries
    Eliminations     Consolidated  

Assets:

          

Current assets:

          

Cash and cash equivalents

   $ —        $ 57,196      $ 2,589      $ —        $ 59,785   

Pawn loans, net

     —          97,375        9,150        —          106,525   

Consumer loans, net

     —          10,224        1,724        —          11,948   

Pawn service charges receivable, net

     —          18,620        1,356        —          19,976   

Consumer loan fees receivable, net

     —          5,869        157        —          6,026   

Inventory, net

     —          63,169        7,106        —          70,275   

Deferred tax asset

     18,258        5,060        1        —          23,319   

Receivable from affiliates

     32,537        (32,537     —          —          —     

Income taxes receivable

     4,612        (3,185     —          —          1,427   

Prepaid expenses and other assets

     19        16,435        3,591        —          20,045   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     55,426        238,226        25,674        —          319,326   

Investments in unconsolidated affiliates

     67,581        44,783        —            112,364   

Investments in subsidiaries

     76,999        9,145        —          (86,144     —     

Property and equipment, net

     —          53,529        16,576        —          70,105   

Goodwill

     —          136,039        7,365        —          143,404   

Intangible assets, net

     22        15,032        1,068        —          16,122   

Other assets, net

     —          6,414        1,158        —          7,572